Legislation to unlock potential of build-to-rent sector passes

Housing Minister Dr Megan Woods, says the changes will help unlock the potential of the build-to-rent sector and give tenants more opportunities to secure long-term homes.

Legislation to enable more build-to-rent developments has passed its third reading in Parliament, so this type of rental will be able to claim interest deductibility in perpetuity where it meets the requirements.

Housing Minister Dr Megan Woods, says the changes will help unlock the potential of the build-to-rent sector and give tenants more opportunities to secure long-term homes.

“The exclusion from interest limitation rules means build-to-rent developments will become more attractive and continue to contribute to quality rental supply in Aotearoa New Zealand. This in turn will create better wellbeing outcomes for New Zealanders who rent long-term.”

"We recognise the big role the build-to-rent sector can play in filling a gap in the general rental market by increasing the supply, density, and diversity of housing.  

“Build-to-rent housing aligns with a number of housing objectives, including improving rental supply, quality, affordability and security of tenure. Increasing the supply of build-to-rent developments will have positive benefits for individuals and whānau who rent,” Megan Woods said.

The legislation just passed excludes approved new and existing build-to-rent developments on registered build-to-rent land from the interest limitation rules in perpetuity. To be eligible for the exclusion, developments must meet the requirements of build-to-rent land in the Income Tax Act 2007:

20 or more dwellings in a single development on a single block or adjacent blocks, held in one or more titles

owned by the same person (a person includes a legal entity like a company) 

each dwelling is being prepared for use, available, or occupied under a residential tenancy

every residential tenancy has the option of a 10-year term, with the ability for the tenant to give 56 days’ notice of termination 

every tenancy agreement includes a personalisation policy. 

Build-to-rent providers must apply to Te Tūāpapa Kura Kāinga – Ministry of Housing and Urban Development to have land registered as build-to-rent to receive the exclusion. Existing build-to-rent providers need to apply by 1 July 2023.

Once approved, Te Tūāpapa Kura Kāinga – Ministry of Housing and Urban Development will record the land on the build-to-rent register and share relevant information with Inland Revenue. Taxpayers can then indicate this in their yearly tax returns.

Once Royal Assent has been received, eligible build-to-rent providers will be able to apply on Te Tūāpapa Kura Kāinga – Ministry of Housing and Urban Development’s website for the exclusion. We expect Royal Assent to occur in the next few days.

(With Inputs from New Zealand Government Press Release)